Tag Archive for 'construction spending'

ABC Reports: Construction Material Prices Rise Month-to-Month, Remain Historically Low

Construction input prices expanded on a monthly basis for the second consecutive month in April, increasing by 0.5 percent according to an analysis of the Bureau of Labor Statistics (BLS) Producer Price Index released today by Associated Builders and Contractors (ABC). The two-month growth streak follows nine consecutive months during which construction input prices fell and construction input prices remain 2.9 percent below their April 2015 levels.

Prices have now decreased on a year-over-year basis for seventeen consecutive months. Nonresidential construction inputs behaved similarly, expanding 0.5 percent month-over-month but falling 3.1 percent year-over-year.

“Despite the end of month-to-month materials price decreases, prices remain low by historic standards and will likely continue to do so for the foreseeable future,” said ABC Chief Economist Anirban Basu. “Commodity prices, including oil prices, have been edging higher lately in response to a number of potentially temporary phenomena, including a weakening U.S. dollar. Coming into the year, the presumption among many market participants was that U.S. interest rates would rise meaningfully, thereby increasing the value of the dollar. Contrary to expectations, interest rates have not risen significantly, and the dollar has been weakening in response.

“That has helped to set the stage for the recent bounce-back in oil and certain other commodity prices,” said Basu. “Other factors have not been as supportive, including a still-weak global economy. Global economic weakness is likely to persist, and the dollar may begin to strengthen again. This means that construction firm managers should not assume that oil and other prices will rise steadily. In fact, reversals in commodity prices remain quite possible. While oil prices have risen sharply since lows achieved earlier this year, copper, natural gas and other prices have expanded only modestly. The next materials price report could easily show further inflation. The story of inexpensive materials will continue to be told.”

Eight key input prices rose in April on a monthly basis:

Crude petroleum prices expanded 17.6 percent from March 2016 but are down 22.4 percent from April 2015.

Unprocessed energy material prices rose 9 percent on a monthly basis but fell 18.2 percent on a year-ago basis.

Prices for steel mill products are up 2 percent on a monthly basis but down 11.3 percent on a yearly basis.

Iron and steel prices expanded 4.9 percent month-over-month but declined 8.6 percent year-over-year.

Softwood lumber prices grew 2.7 percent for the month and 1.8 percent from April 2015.

Concrete product prices expanded by 0.7 percent month-over-month and are up 3.1 percent year-over-year.

Natural gas prices increased 8.4 percent for the month but are down 25.7 percent from the same period one year ago.

Fabricated structural metal prices products rose 0.2 percent month-over-month but decreased 2 percent year-over-year.

Three key input prices declined on a monthly basis:

Prices for prepared asphalt and tar and roofing and siding products fell by 1.9 percent from March 2016 and are down 1.5 percent from April 2015.

Prices for plumbing fixtures and fittings fell 0.1 percent for the month but are up 0.1 percent from the same time last year.

Nonferrous wire and cable prices fell 0.3 percent on a monthly basis and 6.1 percent on a yearly basis.

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Additional ABC Economic Analysis:
Construction Spending
Construction Employment
Producer Price Index
Economic Growth (GDP)
ABC Economic Reports:
Construction Backlog Indicator (CBI)
Construction Confidence Index
State-Level Reports

ABC Reports: Nonresidential Construction Spending Rebounds in October

CEU2“This month’s increase in nonresidential construction spending is far more consistent with the anecdotal information floating around the industry.”—ABC Chief Economist Anirban Basu.

Construction Spending November 2014Nonresidential construction spending bounced back in October, expanding 1 percent on a monthly basis and 4.3 percent year over year, according to a Dec. 2 release from the U.S. Census Bureau. Spending for the month totaled $611.8 billion on a seasonally adjusted, annualized basis. Additionally, the government revised the September spending figure up to $605.8 billion from $596.1 billion.

“This month’s increase in nonresidential construction spending is far more consistent with the anecdotal information floating around the industry, which generally indicates that firms are becoming busier and that backlog is expanding,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Although last month’s numbers for nonresidential construction spending and employment were disappointing and could have implied the nation’s nonresidential construction recovery is stalling, that is not the case.

“The outlook for 2015 remains upbeat,” said Basu. “The economy has gained momentum over the past six to seven months and that is consistent with more aggressive construction starts and spending during the year to come. Even as the economy has gained momentum, the Federal Reserve has remained extraordinarily accommodative due in part to benign inflation readings. Low interest rates combined with solid economic momentum likely mean expansion for the nonresidential construction industry during the year ahead.”

11 of 16 nonresidential construction subsectors posted monthly increases in spending.

  • Office-related construction spending grew by 2 percent in October and is up 16.3 percent from the same time one year ago.
  • Lodging construction spending is up 3.3 percent on a monthly basis and is up 15.9 percent on a year-over-year basis.
  • Conservation and development-related construction spending grew 4.6 percent for the month and is up 33.1 percent on a yearly basis.
  • Spending in the water supply category expanded 0.9 percent on a monthly basis, but is down 1.8 percent on a year-over-year basis.
  • Amusement and recreation-related construction spending expanded 2.2 percent in October and is up 1.4 percent from the same time last year.
  • Manufacturing-related spending expanded 3.4 percent on a monthly basis and is up 22.2 percent on an annual basis.
  • Health care-related construction spending expanded 0.6 percent for the month but is down 8.4 percent from the same time last year.
  • Education-related construction spending expanded 1.8 percent for the month and is up 3.6 percent on a year-over-year basis.
  • Construction spending in the transportation category expanded 2.7 percent on a monthly basis and has expanded 1.6 percent on an annual basis.
  • Highway and street-related construction spending expanded 1.2 percent in October and is up 0.1 percent compared to the same time last year.
  • Public safety-related construction spending expanded 11.6 percent on a monthly basis but is down 1.2 percent on a year-over-year basis.

Monthly spending in five nonresidential construction subsectors declined in October.

  • Commercial construction spending fell 2.2 percent for the month but has grown 9.1 percent on a year-over-year basis.
  • Communication construction spending declined 1.9 percent for the month and is down 9.4 percent for the year.
  • Religious construction spending fell 3.7 percent for the month and is down 4.6 percent from the same time last year.
  • Sewage and waste disposal-related construction spending declined 0.4 percent for the month and is down 0.2 percent on a 12-month basis.
  • Power construction spending fell 1 percent for the month but is 0.7 percent higher than at the same time one year ago.

To view the previous spending report, click here

ABC Reports: Nonresidential Construction Spending Falters in August

CEU2“After a significant acceleration in spending in July, August’s report depicts a steady but unspectacular recovery.”—ABC Chief Economist Anirban Basu.

Construction_Spending_10 1Nonresidential construction spending slipped in August, according to an Oct. 1 release from the U.S. Census Bureau. Nonresidential construction spending shrank 1.2 percent on a monthly basis in August, but has still managed to expand 6 percent on a year-over-year basis. Spending for the month totaled $603.7 billion on a seasonally adjusted, annualized basis. The government also revised the July spending figure down from $617.8 billion to $611.3 billion.

“This is why it is never a good idea to get excited about one month of data,” said Associated Builders and Contractors Chief Economist Anirban Basu. “After a significant acceleration in spending in July, August’s report depicts a steady but unspectacular recovery. Based on various industry surveys, including ABC’s own confidence and backlog indicators, the steady pace of recovery will continue.

“Macroeconomic fundamentals remain promising for growth moving forward,” said Basu. “Job growth has been reasonably steady during the past 12 months and the quality of jobs added to the economy has improved during the course of the current year, which helps explain the ongoing recovery in office-related spending. Federal Reserve policy remains accommodative and interest rates remain benign, which will help support business investment, including in construction, going forward. Consumer spending also should help prompt additional construction, including in the lodging and amusement/recreation categories.”

Seven of 16 nonresidential construction subsectors posted increases in spending in August on a monthly basis.

  • Office-related construction spending grew 1.1 percent in August and is up 18.9 percent from the same time one year ago.
  • Manufacturing-related spending grew 1.7 percent on a monthly basis and is up 14.5 percent on an annual basis.
  • Lodging construction spending is up 0.9 percent on a monthly basis and is up 10.2 percent on a year-over-year basis.
  • Amusement and recreation-related construction spending grew 0.9 percent on a monthly basis and is up 3 percent from the same time last year.
  • Communication construction spending expanded 3.4 percent for the month, but is down 10.5 percent on a year-over-year basis.
  • Religious spending grew 0.9 percent for the month and is up 1.4 percent from the same time last year.
  • Sewage and waste disposal-related construction spending gained 0.8 percent for the month and has grown 3.5 percent on a 12-month basis.

Spending in nine nonresidential construction subsectors declined in August.

  • Conservation and development-related construction spending fell 2.5 percent for the month, but is up 19.8 percent on a yearly basis.
  • Health care-related construction spending fell 0.6 percent for the month and is down 6.6 percent for the year.
  • Education-related construction spending fell 2 percent for the month and is down 1.9 percent on a year-over-year basis.
  • Spending in the water supply category fell 4 percent from July and is 1.8 percent lower than at the same time last year.
  • Construction spending in the transportation category fell 2.9 percent on a monthly basis, but has expanded 3 percent on an annual basis.
  • Highway and street-related construction spending fell 0.6 percent in August and is down 0.2 percent compared to the same time last year.
  • Public safety-related construction spending fell 5 percent on a monthly basis and is down 6 percent on a year-over-year basis.
  • Power construction spending fell 3.4 percent for the month, but is 16.3 percent higher than at the same time one year ago.
  • Commercial construction spending declined 3.1 percent in August, but is up 9.4 percent on a year-over-year basis.

To view the previous spending report, click here

Wells Fargo Reports: Construction Spending Disappoints in August

Wells_Fargo_Securities_logoThe nominal value of construction spending put-in-place fell 0.8 percent in August with downward revisions to data in the previous two months. Private residential and nonresidential both posted declines.

Overall Construction Spending Weaker than Expected

Construction spending fell 0.8 percent in August to a $961.0 billion annual pace. Declines were broad based, with total residential spending down 0.1 percent and nonresidential falling 1.2 percent. Public construction outlays fell 0.9 percent in August, which was mostly due to weakness in state and local highway, street and education spending.

Although the report was weaker than expected, construction spending is well known for its wide monthly swings. That said, the overall trend still points to gradual upward momentum. Overall spending on a three-month annualized basis is up at a 0.9 percent rate, with nonresidential increasing at a 6.1 percent pace. On the other hand, residential is down 7.2 percent on a three-month annualized basis.

Private residential construction spending fell a modest 0.1 percent, with home improvement pulling the headline lower. Home improvement has declined in seven of the last eight months and is down 10.3 percent over the past year. The string of negative readings in this component suggests the pickup in home remodeling is winding down. Spending on home improvement likely peaked in December 2013 and is now down 18 percent from that high in August. Although housing market indicators remain mixed, single-family spending eked out a modest 0.7 percent increase, its second monthly gain. Multifamily construction outlays also rose in August, increasing 1.4 percent. Apartment demand remains strong, as young adults still prefer to rent rather than own, especially in gateway cities.

Private nonresidential construction spending fell 1.4 percent in August, and is now up 9.2 percent from a year earlier. Despite the decline, manufacturing, communication and lodging made the largest contributions to the headline, while power fell on the month. Manufacturing outlays have shown solid gains in recent months and are up almost 15 percent over the past year. Much of the improvement in this component is due to the shale gas boom as chemical companies that use natural gas as an energy source or as feedstock take advantage of record-low natural gas prices. Chemical manufacturing is up a whopping 57.2 percent from a year earlier and rose 3.3 percent in August. Excluding chemical manufacturing, manufacturing spending fell 0.1 percent during the month.

Looking Ahead: Nonresidential Spending Still on Track

Overall construction spending has improved at a sluggish pace but should gain traction along with better economic growth. Leading nonresidential indicators, including starts, architectural billings and the Dodge Momentum Index, suggest conditions are improving. In the months ahead, we should see increased spending from the $957 million Nordstrom Tower located in midtown Manhattan. Outlays for the second tallest building in the country will show up in residential, retail, and hotel.

1 2 3Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Wells Fargo Reports: Construction Spending Improves Marginally in April

Wells_Fargo_Securities_logoConstruction spending rose 0.2 percent in April, which was lower than the consensus estimate. Private residential and public spending rose, while private nonresidential fell for the fourth straight month.

Residential Outlays Continue to Improve

· Total construction spending rose 0.2 percent in April to a $953.5 billion annual pace with upward revisions to previous months’ data. Private residential construction spending rose just 0.1 percent on the month, with home improvements holding down the headline. However, private nonresidential outlays fell 0.1 percent on the month. The decline was concentrated in communication, power and manufacturing.

Public Spending Expected to Slow in Coming Months

· Public construction spending rose 0.8 percent in April, but could begin to falter in the coming months. The largest component of public outlays, ‘highway & street,’ is up 4.9 percent on a year-ago basis, but the expected slower pace of reimbursements this summer to states from the federal Highway Trust Fund (receives revenue from a federal fuel tax and distributes to states for infrastructure projects) could weigh down total public outlays.

Construction Spending_06022014 Construction Spending_06022014